So I recently acquired a triplex on an FHA loan, and I am planning to remodel the unit where I will be occupying. I received three quotes for my remodeling project, but I am having a bit of a tough time trying to decide which one to go with. I was hoping someone on Biggerpockets could give me some pointer. ---- Scope of work: A 3-bd apartment, 1200 sqft. Main tasks: 1. Painting - repainting everything (trim, wall, ceiling). Three colors: White trim, neutral paint color for the wall. 2. Flooring - new flooring throughout. House is old, and the floor is a bit uneven. ~1320 sqft. 3. Remodeling kitchen. New cabinet throughout. 4. Repaint bathroom + repaint bathtub + change out the toilet. ---- GC #1: Reference: Was referred to me by my previous landlord who also owned a few rental properties. Experience: This guy had done several projects for my previous landlord. She was happy with his work. I think her apartments were nice. He also worked on a number of bigger projects. Quote: Gave me a quote of ~$13k. Pros: He seems to be genuine. Willing to work with me on a number of things. Even told me that if I wanted to save, he could tell me where I could do the work myself to save on costs. Did ask me upfront where my budget lies. Cons: Timeline is a bit later than expected, and also takes about 3 weeks to get everything done. He seems to be a bit disorganized, and could be a bit wishy washy. I wasn't able to get a good breakdown of the estimates between labor and costs. GC #2: Reference: Found this guy through my meetings with local real estate investors. Experience: Remodeling his own owner-occupied apartment. Has been running his own business for the last few years. Quotes: He gave me the most inexpensive quote at~$12.5k, Pros: Very professional. Good communicator - seems to be easy to work with. He does have a website online where he showcased his past work, and his rating online is 5/5 (although they are all for small handyman projects). Was able to give me the specific breakdown for costs and labor. He promised that he could get things done in two weeks, and can start fairly early. Cons: The guy is young compared to the other guys. A feedback that I got from another local investor is that this guy gives the best price, does the work really fast, but can be a bit sloppy. However, I was told that he's willing to work with you, and you will need to be vocal about it. GC #3: Reference: Was referred by my current landlord. Experience: This guy owns some real estate investments locally, and has his own crew. He also does a few flip a year. Quote: He gave me the priciest quote at ~16.5k (albeit the flooring option is a bit more expensive, so all in all, it might be the same). Pros: He and his guy seem to be knowledgeable. Was able to give me a lot of advice during the visit. Can start right away. Seems to have a lot of connections and resources (told me that he will introduce me personally to his sales guys at the local appliances store for better discounts) Cons: He wasn't able to give me the specific breakdown either, just a big quote number. Feel like they were not as thorough in terms of scope of work when visiting the apartment.

Here is the problem with this question, you gave 3 contractor options and you have had someone state they would go with each of the three. Not very helpful in the grand scheme. I suggest you take into consideration these items: cost, timeline, quality. It is typical that a good contractor can give you 2 of the 3. If you want it fast and cheap, you likely will have to expect less quality. If you want it good, and fast, then expect to pay more for that, etc. In the flipping game, time is your enemy so paying a contractor more to get it done faster with good quality is often the best move financially, but not always. Then there are the other factors like organization, communication, friendliness, etc. This is a choice where you need to use your people skills and go with your gut on that decision. Good luck and if you make the right decision or the wrong one, either way it can be beneficial to you as the right decision makes you more money, the wrong decision gives you a better education.

@Hoang Bui The following is a list I highly recommend employing, when interviewing General Contractors. I have created this list, from years of experience. 1. How many homes have you rehabbed and/ or renovated? What was the magnitude, of your projects?2. How many projects is your company currently undertaking? 3. Do you work with Investors that need to adhere to strict timelines and scope of work?4. Do you have multiple Sub Contractors, for similar trade skills, such as plumbers, electricians, flooring crews, painters, etc.? 5. Would you be willing to provide a copy of your GC License, your Certificate of General Liability Insurance, and your Certificate of Workman's Compensation Insurance?6. Are you bonded?NOTE:To be “bonded” means the Contractor must purchase a Surety Bond, which serves as a form of Insurance to protect the Contractor’s Customers if he or she fails to complete the job properly or fails to pay for permits, subcontractors, or other financial obligations. 7. Are all of your Sub Contractors Licensed and have Workman's Compensation Insurance? Would your Sub Contractors be willing to provide such information, or would you be willing to sign a waiver stating "All your Sub Contractors have Workman's Compensation Insurance?"8. Do your Sub Contractors have the ability to verbally communicate, with English Language Only Speakers? 9. Do you pull all necessary permits?10. Do you provide a written warranty, for all labor? If so, what is the length, of the warranty? (a minimum of 1 year) 11. Do you provide all applicable warranties, for materials?12. Who is in charge of the job site, to ensure timelines are met and the Scope of Work is properly completed?13. How do you handle dirty work such as debris disposal and clean up? 14. Would you be willing to receive four draw payments that would correspond to four phases of the rehab project? 15. Would you provide references, from past clients?

@Hoang Buityping up a written estimate line by line takes hours, especially if you don't have a computer job. And then you have clients who start to pick appart your estimate, and choose you for the bathroom and the other guy for the kitchen. Reality is, it is almost impossible to accuratly estimate every line item, and so the hope is that one goes fast and easy and that makes room for the other one, which turnes out to be an unpredictable desaster. I would go with #1. Good communication is key. And he is realistic about the timeline. And not available tomorrow is also a good sign.

@Thomas Franklin I expect a contractor to add a reasonable mark up to products procured for a customer’s project. This is why vendors offer contractors a discount. In no way is this dishonest or illegal. Contractors have time and accounting costs relating to purchasing and running receipts through the business. They need to deal with damages and missing pieces and returns. No one realizes the time, hassle, and responsibility of dealing with material purchasing until they manage a project. @Hoang Bui In my experience, there is no contractor worth hiring that likes paperwork or who has the time to provide an itemized proposal. Gathering a few quotes has you did for identical scope of work is the best way to assess whether pricing is fair. Good luck!

@Hoang Bui If a General Contractor is not willing to itemize, how do you know the work to be performed other than generalizations? Also, by separating labor and materials, you minimize the possibility of a General Contractor marking up material prices. Typically, a General Contractor buys materials wholesale and marks them up without the client knowing. I have renovated hundreds of homes and several large Apartment Buildings. This is my third post, in this thread. In the beginning I made several mistakes due to inexperience, poor project management, a lack of initial due diligence, etc. You can accept the lazy way and maybe you will be successful.

@Hoang Bui Your Scope Of Work should be extremely detailed and broken down into each a every task that needs, to be performed such as flooring replacement, a breakdown of what will be done for kitchen remodeling, bathrooms, etc. In addition, timelines, for completion, should be assigned, to every task. Furthermore, materials and labor costs should be separated, for every line item contained, in the Scope Of Work. This will ensure that the General Contractor is not price gouging you on materials. Finally, I would have what I term an “Accountability Clause” included, in your contract. For example, if the General Contractor fails to complete the total project, by the agreed to deadline, for completion, you will deduct x percent, from the Contract Price. If the General Contractor does complete the total project, by the agreed to deadline, for completion, you will pay x percent, as a performance bonus. Finally, you should breakdown the Scope Of Work into phases and pay when each phase is satisfactorily completed and has passed all County and or Municipal Inspections, as applicable.

Which General Contractor to Go With?

AJ Townley

Contractor · Lubbock · Member since 2019 · 6 posts · 8 votes

6y

I'm a contractor and this is my opinion as such:

First, make sure they're all bidding on the same (detailed) Scope of Work. That means materials (flooring, paint), appliances, etc. will all be the same type and/or quality and insure one of them isn't going with the absolute cheapest junk they can find. List things like flooring type (tile, laminate, vinyl, carpet) and cabinet quality (made from plywood or made from fiberboard that disintegrates with any water exposure).

Second, unless you are going to pay for their time to do so, don't request they provide itemized price lists as some have suggested. Asking for material and labor totals separate is more reasonable, but can also eat up a lot of their time for a job they may not even get. This is why I charge a consulting fee.

Third, absolutely make a draw schedule based on the Scope of Work mentioned above. Basically "At ___ completion stage I will pay you XX% of total job cost". An easy way to do this is by room. You can even break it down further if you would like. Generally I separate my scope to coincide with bi-weekly draws for longer projects. A weekly draw can also be done if you're comfortable with it.

Fourth, make the standard of work you expect known up front. It will lead to less headache in the event you have to inform them later that you are not happy with something they did and they need to re-do it.

Lastly, I never recommend going with the contractor that can start right away. A busy contractor is usually a sign of someone thats A. established and B. has customers that are happy with their work so they refer them to everyone they know. I stay booked 2+ months out consistently and at this point our work is all referral based. However, if option #3 subs out all his work and does nothing in house I could see him being able to start right away. That would also account for his higher quote. Someone who self-performs work will almost always be cheaper than someone that subs everything.

I have more that I could go on about but I'll leave it short. If you have any further questions feel free to message me, I'd be willing to hop on a quick phone call to knock out other questions you have if that would be helpful. I don't like seeing either party suffering in a situation like this.

P.S. A contractor marking up materials is in no way immoral, unethical, or illegal. "Contractor pricing" exists solely for that reason. It is essential in order to run a profitable (i.e. sustainable) contracting business. Markup on materials covers paying guys to go get them, fuel, the time it takes to place the order (I've spent hours putting orders together), mileage, etc. At the end of the day if your contractor isn't doing it outright, they're either adding that cost to labor to avoid paying tax on material markup, or they're not running a sustainable business. The warranty does you no good if the contractor isn't in business in a year.

P.P.S. like a few have said, you can usually only pick two: Cheap, Good, or Fast. At the end of the day, Good work can be done Fast, but it won't come Cheap.

6 Reply

John Kondroik

Contractor · The Woodlands, TX · Member since 2018 · 21 posts · 12 votes

6y

@Hoang Bui

Coming from a GC... honestly - if the estimates are for the most part providing the same end result and they are all qualified, go with your gut. The one that you communicate with the best and make a connection with is your guy.

As far as some comments made on expectations of what they should provide as a breakdown, and the other absolutely bogus demands of these poor GCs - this is a sub 20k project... nobody has time to do that on something like this.

I really don’t even see how they are doing it that cheap.

A simple breakdown, in this case like 4-5 line items, is fair.

3 Reply

Lawrence S Moss

Member since 2019 · 9 posts · 0 votes

6y

Clayton Moss

0 Reply

Lawrence S Moss

Member since 2019 · 9 posts · 0 votes

6y

@Hoang Bui

Clayton moss

0 Reply

Anthony Rosa

Rental Property Investor · New York City · Member since 2019 · 703 posts · 538 votes

6y

Originally posted by @Hoang Bui:

@Anthony Rosa This is where I am actually struggling with. Honestly, my knowledge on this is so limited that I don't even know how to navigate or ask questions. So I have been trying to ask questions around materials to have at least apples to apples comparison between GCs. So for someone who just started, where would you recommend as a source of learning/sanity check?

You actually did very well considering the prices are all in line with each other. You already know what you want done. Write down the materials/products you want (cabinets, flooring, etc) because certain materials cost more or less than others. At least with that you have a breakdown of work. As far as painting the tub are you going to change the sink/vanity? tile work?...Sink vanity are inexpensive but tile work can be costly. Good luck!

0 Reply

Kenneth Mooney

Rental Property Investor · Augusta, GA · Member since 2016 · 348 posts · 171 votes

6y

@Hoang Bui choice 1. Sounds like an actual contractor and was through a referral.

0 Reply

Ryan Proffit

Saint Joseph, MO · Member since 2018 · 401 posts · 244 votes

6y

@Hoang Bui My father has been a brick layer/mason for 50 years. He is horrible at paperwork, and you may have to call him a few times. It is aggravating, but sometimes that’s how hiring construction folks can be. He isn’t the cheapest by far, but we usually go out and fix the lowest bidders work quite often. I would just make sure your materials are the same on things like flooring, so you can get an accurate comparison. I am super picky so I would never hire someone known as sloppy. Number 1 seems like maybe he could teach you some things as well. If this was a unit you needed to fil with a tenant as soon as possible my answer would be to hire whomever can get it done first while doing quality work.

1 Reply

Marcus Auerbach

Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes

6y

Very good comment from @AJ Townley. Most investor type contractors do not have the ressources to produce itemized bids: an office, a sales person on salary and sales commission. If they would have those, they could not work with investors (and do work for the lowest possible price).

I have managed many jobs and have a little GC experience myself - one does not realize how hard it is to prize a job until you do it. Remodeling is unpredictable by nature.

The Remodeling Magainze is an industry publication for residential contractors - reading their articles about how to correctly bid a residential job blew my mind! A few examples: mobilization fee - that's for getting tools loaded up an on the job. Reserves for warranty recalls. Line items for dust mitifgation, clean up and trash removal. The job get's bid out with hourly rates the include finges and benefits for all the workers, and margin to pay for their training days and vacation days. In my area $55 to $65 is normal for an internal hourly rate, that is just to break even, at 100% untilization.

Material get's market up to pay for the procurement person, that sits on the computer and phone all day to make sure material is on site. You read about how contractors who bid out a job like this, mark it up 50% can potentially still show a loss at the end of the year and barely break even. It is a hard business.

That is why the prices for residential contractors are what they are - outragous from an investors point of view. If you ever owned a business with employees you understand. You will never see a business owner get upset about mark ups or call it double dipping.. that's normal if you want to stay in business.

You can't have it both ways - you can't expect the white glove service you get from a residential contractor, who charges $65,000 for a kitchen remodel, but expect it to be done for $15,000 and then demand to see a break down of the material, so you can make sure you did not get double dipped on that gallon of paint, for which by the way, someone had to get in the car, drive over there and then stand 20 mintes at the check out.

5 Reply

Matt Groth

Contractor · Grand Marais, MN · Member since 2016 · 249 posts · 417 votes

6y

I wonder if home depot marks up materials? They buy wholesale, right? If you want me to do your shopping, delivery, purchasing, etc., dont you think that comes at a cost? If you want best price on materials, you likely won't get the best price on labor. 3 guys have met with you for a very small job. 2 will never make a dime from you. I am actually very surprised how close the bids are. All are probably in the ball park.

2 Reply

Ola Dantis

Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes

6y

Originally posted by @Hoang Bui:

@Matt M. @Marcus Auerbach If you don't get the breakdown, how do you make sure that you are not getting overcharged on materials? In your opinion, how do you screen for a good GC then, especially for someone without experience? For me, at least, breaking it down gives me an idea of what the process is like, and it's a way to hold somebody accountable for the project.

@Dutch Langley Do you think that you need at least some experience in order to manage newer contractors? I do think that this is an opportunity to develop relationships with this guy, but not sure if I could manage him without the experience myself.

@Thomas Franklin How would you respond to the responses above where contractors do not like breaking down the estimate. This is a challenge that I am running into as well. It's not easy to get contractors to break down the estimate for you.

@Will Barnard This actually makes a lot of sense. Definitely gave me a lot more to think about. Thanks!

@Ola Dantis What do you think about quality? And will do!

Quality is a MUST for us, but that can be managed at an ongoing basis with your frequent visits to the site.

0 Reply

Jon A.

Asheville, NC · Member since 2017 · 385 posts · 274 votes

6y

I would try and find a quality handyman to do all this work. This is just paint, flooring and cabinets. No GC needed in my opinion. You are going to want to have a relationship with that handyman anyway when other things need fixing. You are not going to call a GC to repair a leaking toilet or repaint that wall the tenant messed up when they moved out. I think there is a time and place for a GC but with the right handyman you will save money and still have the job done in timely manner. You can act as your own GC to deal with inspections if need be, but it doesn't sound like that is needed at all.

2 Reply

Timothy Patton

Member since 2019 · 2 posts · 0 votes

6y

@Hoang Bui

I vote the first general contractor good luck

0 Reply

Syed H.

Developer · NY/NJ/PA · Member since 2018 · 758 posts · 935 votes

6y

Originally posted by @Matt M.:

@Hoang Bui

Why do you need the breakdown for labor and materials? Contractors hate that.. me included. If the whole job is $X, and you are ok with that, what’s the difference?

I agree for the initial estimate since it’s definitely time consuming, but before you sign a contract a full breakdown is always needed just because there will be change orders. Also an owner should know what material quality is being used. All flooring; etc isn’t the same.

1 Reply

John Clark

Member since 2018 · 1k+ posts · 1k+ votes

6y

"He promised that he could get things done in two weeks, and can start fairly early. . . . A feedback that I got from another local investor is that this guy . . . can be a bit sloppy . . ."

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Slop kills time, so this guy's two weeks is out the window. You are going to live in the unit being remodeled, and no doubt rent it out in the future, or maybe sell the building. You get sloppy work and are aggravated while living there, and it reduces your rent/sale value later on, or you blow your "two weeks." Worst case scenario is that you blow your two weeks AND get sloppy work. He also doesn't have much experience with jobs your size. So # 2 is out, period.

Choice is # 1 or # 3. Let's look at # 1: He's got experience with jobs your scale, and gave you a reasonable time time. Your con is: "He seems to be a bit disorganized, and could be a bit wishy washy. I wasn't able to get a good breakdown of the estimates between labor and costs. " As others have pointed out, however, labor/materials costs are irrelevant, you're just looking at total price. So your con boils down to "he seems a bit disorganized."

Now look at # 3: Has the most experience with jobs your size, willing to introduce you to his network, and you might get his flooring option down by some unknown amount. Your major con is: "Feel like they were not as thorough in terms of scope of work when visiting the apartment."

Questions:

A. Is downgrading # 3's flooring options going to reduce his price to the amount of #1's estimate?

B. Can # 1 introduce you to his "connections and resources?"

C. Is the difference in introduced "connections and resources" between # 1 and # 3 worth the extra money?

Decide those for yourself.

Then also consider the red flag you have for # 3; he wasn't as "thorough in terms of scope of work" as # 1 was. This leads to the question of blowing budgets for "extras" that you thought were included. As others have noted, you need to have a fairly detailed scope of work in your contract (which isn't line item costs, but details the items), and a budget for contingencies (e.g., installing a new toilet, what if soil stack needs replacing?).

Subject to your decisions, I would go with # 1.

1 Reply

Nicholas Alexander

Rental Property Investor · Charlotte, NC · Member since 2019 · 40 posts · 23 votes

6y

@Matt M. So I know what I am paying for and can determine where I want to spend my money. I don't think its unreasonable that a professional contractor should know their base rate and material cost for standard items.

0 Reply

John Clark

Member since 2018 · 1k+ posts · 1k+ votes

6y

"So I know what I am paying for and can determine where I want to spend my money."
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Your statement does not bear scrutiny, @Nicholas Alexander. If you're spending $20k on a floor, let's say, and quality is the same, why do you care whether the contractor got the materials for $8k and labor for $12k, or whether he got the materials for $12k and the labor is $8k? Sorry, but "where" you spend your money has meaning in terms of "better bathrooms" as opposed to "soundproofing walls" as opposed to "better kitchens." If quality is the same, then the materials/labor cost ratio is irrelevant. You got X level of quality for Y dollars on Z project. The proportions of the Y dollars is irrelevant. You conflate quality concerns with materials costs.

As another poster pointed out: If the rent is $1,000/month would you tell him that your out-of-pocket costs were only $900/month? Would you then further tell him how much was mortgage, and taxes, and whatnot, and how much was return on your investment?

In short, should I ask you how much you pay for Lexis, when another lawyer uses WestLaw? What about you using a live receptionist when the other guy has a 24/7 answering service? What possible difference could it make to me, if both of you have the same bill for me at the end of the month, and your legal quality and results were the same?

1 Reply

Marcus Auerbach

Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes

6y

This discussion is going entirely in the wrong direction. Working with contractors is about building long term win-win relationships, not about squeezing the guy out like a lemon. If you do, it will come back at you.

I am surprised you even found 3 people, who came out and gave you estimates! In my market, if you are a newbie and they don't know you - or know you are shopping for cheap estimates, you will be talking to a voicemail!

0 Reply

Hoang Bui

OP

Member since 2019 · 26 posts · 4 votes

6y

@Marcus Auerbach I am not trying to squeeze anyone out. If that was the case, I would have gone with the cheapest option. Just trying to find a good fit. That's all. And the fact that I am a newbie doesn't mean that I can't work to find referrals. Thanks again!

0 Reply

Marcus Auerbach

Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes

6y

Originally posted by @Hoang Bui:

@Marcus Auerbach I am not trying to squeeze anyone out. If that was the case, I would have gone with the cheapest option. Just trying to find a good fit. That's all. And the fact that I am a newbie doesn't mean that I can't work to find referrals. Thanks again!

My comment was not mean to you personally, I know thats not what you intend to do.

0 Reply

Which General Contractor to Go With?

Which General Contractor to Go With?

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